SBA Unveils New PPP Forgiveness Applications & Guidance

Jan 21, 2021

On Tuesday, the U.S. Small Business Administration (SBA) and Treasury released new PPP loan forgiveness guidance along with new forgiveness applications.

These applications include:

  • PPP Loan Forgiveness Application Form 3508S – this new one-page application is for borrowers who received a PPP loan of $150,000 or less. While no supporting documentation is required to be submitted with the application, borrowers are advised to maintain payroll, nonpayroll, and other documents that could be requested during an SBA loan review or audit.
  • Form 3508EZ – this streamlined application is for borrowers that meet certain safe harbors
  • Form 3508 – the full application is for those who don’t qualify for using either of the previous two forms
  • Form 3508D – this two-page document is to be submitted by certain individuals who are required to disclose a controlling interest in an entity applying for a PPP loan

Borrowers using Forms 3508 and 3508EZ must submit payroll and nonpayroll documentation when applying for loan forgiveness. The instructions included with these forms provide lists of the required documents.

In addition to the new forms, an interim final rule (IFR) was released which simplified previous loan forgiveness rules and integrated changes made by The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (P.L. 116-260) which provided an additional $248 billion of funding to the PPP and allowed for a second-draw.

The SBA also noted it had approved roughly 60,000 PPP loan applications submitted by nearly 3,000 lenders for over $5 billion from the program’s re-opening through Jan. 17.

As always, we encourage you to connect with your William Vaughan Company advisor with questions on how this may impact your individual circumstances, or check out our COVID-19 Resource Center for additional insights.

Categories: COVID-19

SBA Releases New Forms In Preparation for Paycheck Protection Program Re-Opening

Jan 11, 2021

The U.S. Small Business Administration (SBA), in consultation with the Treasury Department, announced the Paycheck Protection Program (PPP) will reopen today initially for community financial institutions (CFIs) that serve minority- and women-owned businesses to make loans. Specifically, CFIs can begin making loans to first-time PPP borrowers today and second-time PPP borrowers on Wednesday.

The SBA and Treasury said the PPP would open to all lenders a few days after the opening for CFIs, but they did not specify a date. Borrower loan application forms were also released:

Form 2483 is updated from previous iterations starting with the original PPP program. Form 2483-SD is a new form for qualified PPP borrowers to seek a second draw of a forgivable loan as they try to navigate economic seas churning in the throes of the COVID-19 pandemic.

Finally, the SBA released additional guidance outlining top-line summaries of the first-draw and second-draw PPP loans and a pair of procedural notices.

For more information regarding the PPP and second-draw loans under the Consolidated Appropriates Act, 2021, check out our latest webinar here or review our PPP Application Guide here. As always, connect with your William Vaughan Company advisor for questions or concerns.

Categories: COVID-19

Americans Begin to Receive Second Round of COVID-19 Stimulus Checks

Dec 30, 2020

Tuesday afternoon, U.S Treasury Secretary Steven Mnuchin took to social media announcing the disbursement timeline for the second round of stimulus checks. He noted the following:

  • Direct Deposit – Individuals who have direct deposit set up with the IRS can start looking for their second stimulus payments as early as last evening (12/29) and continue into next week.
  • Paper Checks – The IRS will begin sending out paper checks today, Wednesday (12/30/20), which means people should begin receiving those checks within the next two weeks.*
  • Status of Payment – Mnuchin also stated later this week, you can check the status of your payment here

*To speed up delivery, a limited number of people will receive their second stimulus payment by debit card. But the form of payment for your second stimulus check may be different than your first payment. Some people who received a paper check last time might receive a debit card this time, and some people who received a debit card last time could receive a paper check. The pre-paid cards will come in white envelopes that “prominently displays the U.S. Department of the Treasury seal,” the IRS said. The card will bear the Visa name on the front and the name of the issuing bank, MetaBank, will be on the card’s back. The information included with the card will explain that this is your Economic Impact Payment. There’s more information on the pre-paid cards here.

While Congress remains in discussion about an increase to a $2,000 stimulus amount, what we know for now is:

  • As it currently stands, the checks will be for $600 for eligible adults, and $600 per dependent, meaning a family of four could receive $2,400.
  • Individuals who earned less than $75,000 and those married filing jointly who earned less than $150,000 in 2019 are eligible for the full amount.
  • Those who made more are eligible for reduced stimulus checks at a rate of $5 per $100 of additional income.
  • The checks phase out completely for individuals that earned $87,000 and couples that made $174,000 in 2019.

If you have questions regarding your stimulus check, please contact your William Vaughan Company advisor or contact us at 419.891.1040. We’d be happy to help!

Categories: COVID-19

COVID Relief Bill Signed Into Law By President

Dec 28, 2020

The recent bill passed by Congress (Consolidated Appropriations Act [CAA]) finally became law after being signed by President Trump on Sunday, December 27th. It was feared disagreements over individual stimulus amounts and other various provisions deemed “wasteful spending” by the President would lead to a stalemate and ultimately to a pocket veto and subsequent death of the bill. Cooler heads prevailed, however, with businesses and individuals getting another financial shot in the arm. Below is a summary of the major highlights from the 5,600+ page law and the tax implications therein.

Individual Taxpayer Provisions
First and foremost, on the mind of most individuals impacted by COVID-19 are the second wave of stimulus payments and the unemployment benefits extension. Individuals will each be receiving a stimulus check in the amount of $600* ($1,200 per couple) as well as $600 per dependent child, e.g., a family of four will receive $2,400. These benefits will begin to phase-out when AGI reaches $75,000 ($150,000 for couples filing jointly) at a rate of $5 per $100 in excess of AGI thresholds. As with the first round of stimulus, these checks will be tax-free and will likely be reported as advance payment of credits on each taxpayer’s 1040.

*President Trump pushed back on this bill and advocated for stimulus checks of $2,000 per individual but staunch opposition from the Senate tabled these suggestions for what could be yet another stimulus under the next administration.

In addition to the $600 stimulus checks, Congress voted to extend the federal unemployment supplement albeit at a reduced rate of $300 per week (down from $600 under the CARES Act) through March 14, 2021. Along with the unemployment subsidy comes extensions of the Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC) programs as well.

Further notable tax provisions as they relate to individuals are as follows:

  • Special charitable contribution deductions for non-itemizers of $300 ($600 for married filing joint returns) for the 2021 tax year
  • Extended suspension of the 60% charitable contribution limitation through 2021
  • Extended deferral period for employee’s share of Social Security tax to December 31, 2021
  • Permanent extension of the reduced medical expense deduction floor (7.5% of AGI)
  • Ability for lower-income individuals to use 2019 earned income to calculate earned income tax credit and a refundable portion of the child tax credit (helps those who had lower earned income in 2020 due to COVID-19 receive potentially larger refunds)
  • Permits rollover of unused amounts in health and dependent care flexible spending arrangements

Business Taxpayer Provisions
The biggest provision of the Consolidated Appropriations Act, 2021 in the business arena was the decision to reverse the IRS position regarding the deductibility of expenses used for PPP loan forgiveness as well as a second wave of PPP loans. Details of these provisions can be found in our recent blog post here. For the purpose of this post, we will address the other main tax provisions for businesses found in the CAA.

The existing Employee Retention Tax Credit (ERTC) was modified retroactive to the beginning of the CARES Act. Before the passage of the CAA, businesses had to choose whether they would take advantage of PPP loan forgiveness OR claim the ERTC. Now, for 2020, businesses can request forgiveness of their PPP loans AND claim the ERTC. Provisions in the law state wages paid for with PPP loan proceeds cannot be used in calculating the ERTC in order to prevent double-dipping but for businesses with enough wages and other expenses to qualify for both, that option now exists. For 2020, the ERTC calculation is the same. The credit is capped at 50% of $10,000 of wages per employee for the year.

The law also provides for an extension of the ERTC into 2021 which increases the credit available to 70% of wages up to $10,000 per employee per calendar quarter. In addition, it raises the number of employees counted when determining relevant qualified wages from 100 to 500, reduces required year-over-year decrease in gross receipts from 50% to 20%, and clarifies that group health plan costs can be considered qualified wages EVEN WHEN no other wages are paid.

Other notable business provisions include:

  • Extension of Families First Coronavirus Response Act (FFCRA) paid sick leave and expanded FMLA sick leave tax credits through March 31, 2021
  • Full expensing of “restaurant” meals purchased in 2021 and 2022 provided other requirements for deductibility are met
  • Five-year extension of the Work Opportunity Tax Credit (WOTC)
  • Five-year extension of the employer credit for paid family and medical leave
  • Extended suspension of the corporate 60% charitable contribution limitation through 2021

Due to the sheer volume of text in the Consolidated Appropriations Act, 2021, it is impossible to capture everything in this post. As always, please contact your William Vaughan adviser to discuss how we can help you navigate the myriad of provisions provided for by this law to best serve you and your business.

By: Jon Floering, CPA

Categories: COVID-19, Tax Compliance

Congress Approves New Round of PPP and Rules on Deductibility

Dec 22, 2020

What happened?

Congress has been meeting seemingly around the clock in an effort to pass a bill before heading home for the holidays which, among other things, would provide a much-needed second round of Paycheck Protection Program (PPP) Stimulus. As of late Monday, December 21st, they were finally able to agree on negotiations and vote to approve this bill. President Trump is expected to sign this bill into law over the next few days.

What are the details?

Updates to the existing PPP program
First and foremost, the issue regarding the deductibility of expenses used for PPP1 loan forgiveness was finally resolved as Congress agreed, despite the push-back of the Treasury, to include legislation that allows for the deductibility of such expenses. This means that businesses who received a PPP1 loan (application deadline of August 8, 2020) that has been forgiven, or that they expect to be forgiven, can now deduct those related expenses from taxable income. This will result in a tax-free infusion of cash into many small businesses across America, which is in line with the original Congressional intent.

In addition to the deductibility of those expenses, additional items have been added to the list of qualified expenses for loan forgiveness. Among these are operating expenditures related to software or cloud computing that facilitates business operations, property damage costs (due to looting/vandalism that occurred during 2020 and were NOT covered by insurance), certain supplier costs, and covered worker protection expenses related to the adaptation of businesses per regulatory requirements imposed by the CDC, Health and Human Services, etc. These additional expenditures are only allowable for businesses that have not yet applied for forgiveness.

Congress also provided for modified covered periods in relation to PPP1 which gives businesses the option to select a covered period that falls anywhere BETWEEN 8 and 24 weeks after the loan origination date.

The bill repeals the requirement that EIDL (Economic Injury Disaster Loan) advances be deducted from the PPP forgiveness amount, and it allows the Employee Retention Credit to be claimed by PPP Loan recipients.

Finally, also retroactive to PPP1 is a much-desired streamlined application process for loans amounting to $150,000 or less. These applications require qualified businesses only to submit a one-page application that identifies the number of employees the borrower was able to retain as a result of receiving the PPP loan, the estimated amount of loan proceeds spent on payroll costs, and the total amount. Beyond that, borrowers need to simply attest to the fact that they complied with PPP requirements, and they are done. Gone is the need for hours and hours of painstaking calculations and document retrieval.

PPP2 Stimulus
This wave of stimulus will appropriate roughly $900 billion for a host of provisions, but for the purposes of this post, we will focus on new funding for the Paycheck Protection Program (PPP2) specifically. To begin, the maximum loan amount allowed in this round is $2 million, down from $10 million with PPP1, and it will target two groups specifically:

1. A second draw for the hardest hit borrowers from PPP1. Items to consider for qualifications of this group are as follows:

  • 300 or fewer employees; and
  •  25% gross receipts decline in any quarter in 2020 compared with the same quarter in 2019
    • EIDL and PPP proceeds are NOT included in gross receipts
    • Based on calendar quarter (not any consecutive 3-month period)
    • Tiered system where certain loans only require self-certification while others will need supporting documentation
  • Full use of your PPP1 loan amount
  • All loans will be subject to SBA review – congress is appropriating funds to the SBA to support manpower needed to conduct reviews of PPP loan applications so it can be expected that there will in fact be reviews by the SBA

2. First time PPP borrowers. Eligibility is as follows:

  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans
  • Sole proprietors, independent contractors, and eligible self-employed individuals
  • Accommodation and foodservice businesses that average less than 500 employees per physical location
  • Non-profits, including churches
    NEW in this round is 501(c )(6) and destination marketing organizations with 150 or fewer employees – think economic development, chambers of commerce, tourism, etc. – subject to certain lobbying thresholds

The structure of PPP2, including the loan calculation formula, eligible use of proceeds, and forgiveness feature are very similar to that of the updated PPP1. In general:

  • The loan amount will be computed as 2.5 months of payroll. **Hotels and restaurants can get up to 3.5 times their average monthly payroll costs (subject to the $2 million maximum)**
  • Eligible uses of PPP2 funds will include payroll, rent, utilities, and mortgage interest just as in PPP1 as well as the additional eligible expenses noted in the “Updates to PPP1” section above.
  • PPP2 loan forgiveness will be tax-free and related expenses are deductible.
  • PPP2 loans will follow the new simplified forgiveness process.

What should I do now?
It is expected that the SBA will begin accepting PPP2 loan applications sometime in January, so now is the time to begin considering the need for a second PPP loan and whether your business satisfies the requirements outlined above. With the PPP forgiveness expense deductibility question answered, you may need to revisit your tax projections. We also recommend that you consider taking advantage of the Employee Retention Credit if you are newly eligible.

Watch for additional WVC resources including blog posts and webinars with more details on PPP2 and other items included in this round of stimulus. Contact your WVC advisor to discuss the nuances of this new stimulus package and how it will impact your business.

Categories: COVID-19

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